WASHINGTON (Reuters) - Treasury Secretary Henry Paulson
will convene a meeting next week with the heads of mortgage
finance giants Fannie Mae and Freddie Mac and leading senators
to discuss legislation that would create a stronger regulator,
a Treasury spokeswoman said on Thursday.

In recent months, Paulson has helped the mortgage finance
companies expand their investment holdings and buy larger home
loans in order to stabilize the housing sector, but he has not
been able to broker a deal over a new regulator.

As lawmakers look forward to the summer break, fall
elections and a new presidential administration, Paulson only
has a short time to help forge a new regulator for the nation's
two largest sources of mortgage finance.

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Treasury spokeswoman Jennifer Zuccarelli said the meeting
would take place next week but would not discuss details.

Richard Syron and Daniel Mudd, the chiefs of Freddie Mac
and Fannie Mae, respectively, will meet Paulson along with Sen.
Christopher Dodd, the Connecticut Democrat who chairs the
Senate Banking Committee, and Sen. Richard Shelby, the
committee's ranking Republican.

Paulson and Robert Steel, Treasury undersecretary for
domestic finance, have pushed legislators for months to
finalize a new regulatory framework for Fannie and Freddie
while they also grapple with the housing crisis. Steel is also
scheduled to attend the meeting.

Fannie and Freddie, which are Congressionally chartered but
privately run, are formally regulated by the Office of Federal
Housing Enterprise Oversight, although Paulson has had a strong
hand in the initiatives of recent months. James Lockhart, the
OFHEO director, was not due to take part in next week's
meeting, sources familiar with the meeting said.

Doug Duvall, a Freddie spokesman, said the Virginia-based
company was "carrying through on our commitment to be a
constructive part of the (legislative) process and will work
closely with the (Banking) Committee going forward."

In recent months, regulators have loosened restrictions on
the two companies and Treasury officials have tried to
jump-start legislation that would create a stronger regulator
for the two government-sponsored enterprises.

One sticking point in recent months over efforts to create
a new regulator has been how to manage the companies'
investments, which critics say are dangerously bloated but the
companies say are critical to their mission of promoting home
ownership.

The House of Representatives passed its version of reform
last year but the issue has been stalled in the Senate Banking
Committee where a slim majority among Democrats means the two
parties must work closely on compromise legislation.

On Wednesday, Dodd told reporters that he is "quite
confident that we can reach some accommodation on (the reform)
and we should be able to get that bill done."